The Supply Chain Tie Ups Are Getting Worse
Manpower at the port [of Yantian] terminal is down by 70% because of all the COVID quarantine restrictions and mass testing. All the major carriers are characterizing this situation as “deteriorating” because of the increase in COVID cases.
The above quote is from FREIGHTWAVES, a magazine for the global freight industry. The report, “Viewpoint: Containers don’t lie — Yantian port crisis getting worse,” details the current lack of human resources at one of China’s busiest ports.
In the below map, you can see that Yiantan (top right), Shenzhen (top left), and Hong Kong (bottom middle) form an inverted triangle. Yantian’s location, therefore, makes it of particular importance to the toy industry.
According to the FREIGHTWAVES article, the port is operating at 30% capacity. The disruption is causing a waterfall effect as delays take place and cargos have to be transferred to alternative ports. The result is rising costs for shippers due to “space and equipment premiums.” The article quotes one individual as stating that two years ago, containers cost $2000. Now they are up to $14000.
Bottom line, due to the challenges, shipping costs and shipping times are up, and they may well go higher.
Size Matters In Securing Containers
It appears that in the fight to secure containers and space on container ships, the big retailers have a distinct advantage. That is according to a Marketplace interview with India Hynes, CEO of Vinotemp, “a custom wine cabinet manufacturer and luxury appliance distributor.”
The interviewer, Kai Ryssdal, asked Ms. Hynes how you secure containers when there is so much scarcity. Here is her response:
Well, I don’t. That’s the big problem right now. So for example, last year, we paid something like $3,500 a container. Now we’re looking at $10,000 a container. And we are told if we pay a surplus, a $1,500-$2,000 surplus, we can get some space. So basically, we would be taking the space of someone else. So of course, I look at that as a shakedown, and then I get really mad. I’m like, “I’m not paying that.” So the two companies that are getting space right now, so I hear, are Amazon and Walmart. And I’m a little guy, so I’m last in line.
Surprising Reasons for the American Worker Shortage
I have heard a number of reasons for the surprising shortage of workers. Some blame the government checks sent out during the pandemic while others suggest that women are not able to resume work due to having to take care of children who have not been able to attend school.
I found some additional causes in an interesting New York Times article by Betsey Stevenson entitled: “The Jobs Report Takeaway: A Huge Reallocation of People and Work Is Underway.” Ms. Stevenson notes that people have been away from the office and its confines for over a year. As a result, they, have had time to think about their lives, their work and the balance between the two. Some simply don’t want to go back to what they did in the past. As she puts it:
We are undergoing an enormous reallocation of people and jobs. People need time to find their new position in the labor market.
A Pew study in January found two-thirds of the unemployed were considering changing their occupation or field of work.
Complicating all of this is that, according to Ms. Stevenson, people hate looking for jobs. As a result, they are putting off getting those resumes in shape and getting in front of potential employers.
Ms. Stevenson summarizes:
The pace of labor market recovery will undoubtedly accelerate in the coming months. And our current slow pace might just be the right thing in the long run. More productive workers mean a more productive economy, but getting workers into the jobs in which they can be most productive will take time.
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